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With no coherent identity, the collective strategy in the Video on Demand market might best be described as firing buckshot into a vat of gelatin-with many providers taking a different trajectory toward a less-than-solid target.
That same lack of focus is drawing new companies into the hunt, but their challenge is to hit upon the right VOD product even as they compete with a pack of well-established competitors.
Although there are a lot of players entering VOD, Rajiv Jaluria doesn't find the space overcrowded. Jaluria is chairman of DemandVideo, a two-year-old company offering a package VOD system to small and medium-sized cable operators.
"Actually, it is not as diverse it might appear," he says. "You are look (???) by the numbers, but there are different service buckets you can put them into."
While mainstays SeaChange International and nCUBE Corp. concentrate on the hardware, players such as In Demand LLC and TVN Entertainment Corp. focus on gathering content, Jaluria points out. Then there is a new herd of startups offering Internet-based VOD using caching-server systems.
DemandVideo itself is concentrating on creating a full VOD system, meshing hardware from these vendors with network and content into one ready-made package. The company is setting itself apart further by sidestepping the competition for larger cable operators. Instead it is focusing on the smaller operators, overbuilders and telephony-based Digital Subscriber Line service providers that often don't have the resources to cobble together quickly a VOD service of their own and are looking for help to speed the process.
"These operators who may not have the expertise or want to get it done to hit a window of opportunity-they may choose a service," Jaluria says. "We think there is a large market for this."
DemandVideo is now running the VOD service for overbuilder Seren Innovations in its St. Cloud, Minn., and Contra Costa County, Calif., systems. Competitive broadband network operators such as Seren are key market targets, because they offer modern network design and generous bandwidth capacity. "It is taking off, so that's why you see the flurry of activity," Jaluria says.
Another relative newcomer seeking its own VOD play is information technology veteran Unisys. After simmering a VOD and an interactive TV platform for about three years, the company recently served it up, announcing a deal with prime set-top box maker Scientific-Atlanta Inc. to blend its design with SA's gear.
Steve Burrows, program director for Unisys' VOD, also sees the market as far from unified. So Unisys is taking a flexible approach, making its product part of a larger interactive television package that doesn't depend on just a cable platform.
"This marketplace can take a lot of different directions," he says. "Certainly in the cable space we are talking to a lot of folks and we could certainly pick up a trial. But we are looking at a lot of things."
Unisys also is betting on a highly centralized control system, with servers able to fire off up to 5,000 simultaneous streams as opposed to other maker's servers, which control 300 to 450 simultaneous streams. Burrows thinks using a strategy of deploying fewer servers with greater capacity will be attractive to network operators wanting simplicity.
"What that means is fewer things to manage," he says. "As this scales up it becomes something of an issue-how do you manage that number of components? I think that is an area that has to be conquered."
Unlike other providers, Unisys started out working with network operators on the telco side. Most of that work has been overseas so far because the markets there are developing more quickly. But Unisys now is involved in a domestic VDSL trial with an undisclosed operator, and Burrows hopes such efforts stimulate the video market.
"In the last year the focus has been to broaden it out beyond telecom to the cable market and see what the requirements are and where it is going," Burrows says. At the same time, he sees domestic telcos jumping into video, "taking on the same approach for home entertainment that cable has."
"I think there's going to be more people coming into this as soon as we reach critical mass," Burrows says. "But there are going to be lot of add/drops before then."
Whatever the strategy, there are no safe bets in the fledgling VOD world, according to Vince Neton, senior vice president for the content and cable practice at KPMG Consulting, LLC.
"It's a pretty risky business right now," he says. "Everyone is sensing and smelling that it is going to be hot. But nobody has the solution yet, nor have they put the big investment into it yet."
Neton added that irrespective of the technology, as Viacom Inc. honcho Sumner Redstone once quipped, content is king. Newcomers to VOD that don't have the ties to the television and cable content holders won't be able to deliver the quality video library vital to their survival.
"What they are missing in the equation is they don't have the content, the marketing or the alliances," he says. "I think early on you are going to see some money losses."
Nevertheless, as the commercial VOD market solidifies, there might be more new competitors willing to take a shot.
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